Factoring in Economies of Scale

In today’s SearchInsider at MediaPost, an SEMer by the name of Steve Baldwin says:

Outsource where possible. … In flush times, marketing staffs tend to grow organically—like barnacles on the hull of a ship—but at the cost of efficiency and flexibility. For the past two years, SEM has been increasingly insourced for a range of reasons that might have made sense when times were good. Today, this trend is impossible to justify, except for businesses that are merely dabbling in search (which is never a good idea).

Clearly overstating—the only time you shouldn’t outsource SEM is when you are merely dabbling?—Baldwin still fails to provide a reason to cut SEM staffing.

I assume flexibility refers to the ability of outsiders to bring a much wider range of experiences to bear on a problem, since they’re not limited to those experiences your own company has had. That’s fine. But efficiency is not ipso facto a good thing, if effectiveness suffers as a result. What I mean is that SEM might very well be better executed by those who know your industry through and through, rather than by SEM generalists (such as search-marketing firms). This can be a killer if you’re in a B2B market and you outsource to a firm that, while expert in SEM, doesn’t know sh*t about terms and jargon used in your industry.

This is so true of marketing as a whole that it’s worth generalizing and restating: Find efficiency through economies of scale, sure: but only up to the point where the cost that comes from less focused and effective marketing becomes too great.

Right now, of course, we’re Decoupling, so such niceties can go out the window. But understanding where economies of scale help and where they don’t will get you to the Opportunism phase as soon as possible.

Short- and Long-Term Shifts

In a generational occurrence like the present economic meltdown, we all want to figure out as soon as possible what the new models will look like: How we’ll invest, how we’ll finance our homes, how we’ll live our daily lives; what kind of jobs will be out there and how businesses will run themselves and prosper. For the purposes of this blog, we want to figure out what marketing is going to look like.

I think the first step in doing this is to know when we’re talking about. Then we can get to what is going to happen (during each “when”). The point here is that, rather than ask “How is marketing going to change in this new environment?” we need to first ask “How many times are we going to change?” The current changes are just initial reactions; short-term shifts. But our instinct is to see them as permanent long-term shifts.

Actually I think there are going to be four distinct time periods (or phases) to marketing in the downturn—each of which will have its own distinct marketing model.

Decoupling

Abandonment of previous marketing assumptions in reaction to the sudden change in expectations. This is going on right now, and hasn’t ended.

Austerity

Plans made in the expectation of little growth being possible.

Opportunism

Marketing techniques that seem to be successful under the new economic conditions become more widespread, and there are new winners and losers.

Hand-me-down

Economic times change, but the harsh lessons of the downturn continue to be applied.

Rebirth

Marketing techniques that seem to be successful during growth periods are rediscovered and become more widespread, and there are new winners and losers.

I’ve included #5 for completeness’ sake, but don’t consider it to be part of this discussion because it actually takes place after the downturn ends.

I think that the long-term shifts, what in the future we’ll call “marketing in the downturn,” as opposed to what we call that now, will start somewhere between #2 and #3, say a year from now.